Conquer the Crash
You Can Survive and Prosper in a Deflationary Depression
By: Robert R. Prechter Jr.
Published: Jan 1, 2004
ISBN: 9780470870907
Format: Paperback, 352pp
Publisher: John Wiley & Sons Inc
Just as inflation, asset value bubbles and bull markets can develop, so too can deflation, crashes, and even economic depressions, writes Robert R. Prechter Jr. in his controversial and provocatively titled best seller Conquer the Crash: You Can Survive and Prosper in a Deflationary Depression. Basing his conclusion of an impending crash of the various asset bubbles on the Elliott Wave Theory of market changes, the author sees the current market situation as unique in the lifetime of everyone alive today. He also sees a major crash in the charts.
Robert Prechter bases his economic forecasts on the wave theory of human advancement discovered by Ralph Nelson Elliott in the 1930s. Elliott found, through careful examination of stock market charts, that the market moved in waves. There were always five waves in one direction followed by three corrective waves. Of the five impulse waves, the first, third and fifth waves were always corrected by the second and fourth waves. Not only were these waves found in large scale charts over years and decades, but also down to minute hourly and daily chart records as well.
Ralph Nelson Elliott (photo left)
R. N. Elliott wrote that the fractal nature of the charts, recording the same basic patterns, reflected that of nature. Just as a seashore forms the same outlines whether viewed from the ground, the air, or even outer space, so too do the fractal waves of the stock market. Elliott's most powerful insight was that markets move as a result of human thoughts and actions. He found that economic busts follow great boom times, and always in very predictable patterns.
Robert Prechter (photo left)
Picking up on these repeating patterns, and projecting them into the future, Robert Prechter believes we are currently in the fifth wave of the current economic super cycle that began in the 1930s. More importantly, we may be completing a fifth wave in a larger grand super cycle that began with the birth of the United States in the latter 18th Century. As a result, the correction for these two massive cycles will be harsh and deep. Asset values, including real estate, stocks, and bonds, will crash to very low Great Depression levels. The early stages of the predicted crash may already be happening in the real estate and subprime lending markets.
Despite the pessimistic economic forecast, Conquer the Crash is really an optimistic book. The contrarian aspect of not following the highly inflated assets is good advice at any time. The hope and dream created bubble economy is certain to reverse, and the wave theory points that out as surely as night follows day. Instead of spending money now, the author advises holding onto cash until the crash reaches its bottom level. At that point, the cautious buyer can once again be a contrarian, purchasing the home, business, or other assets at rock bottom prices.
For me, the power of Conquer the Crash: You Can Survive and Prosper in a Deflationary Depression by Robert Prechter is in the background to the fifth wave bubble and how it is driven by human emotions. Understanding that people cause stock market and housing market changes is empowering for the individual. Knowing that social mood is the driving force behind rises and falls in the markets, and those moods ebb and flow in waves, helps the prudent investor to recognize buying and selling opportunities.
I highly recommend Conquer the Crash: You Can Survive and Prosper in a Deflationary Depression, despite its 2004 publishing date. The current fifth wave of high degree is powerful and long lasting. As a result, the crash has been postponed and a severe recession avoided up until now. The future may not be as bright for buyers of expensive stocks and real estate, however.
Read Conquer the Crash: You Can Survive and Prosper in a Deflationary Depression and learn how wave theory can affect your family's financial status, and how to profit from the waves of social mood. As surely as bad times follow booms, a strong and growing economy will reassert itself as well.
